Weekly Market Recap
In my last weekly note, I expected, pull back on NIFTY at least of some magnitude as it has deviated unprecedented higher from its moving averages, but NIFTY took a different path and continued to rally higher even more ostentatiously. However, the sudden and sharp reversal was being witnessed on Friday that added up on my assumption and kept my analysis intact so far.
In the week gone by the benchmark, SENSEX added 710 points, or 1.22% to reach 59015. Similarly, NIFTY gained 214 points, or 1.24%, and settled at 17585. While BANKNIFTY outperformed after a long time and surged over 3%.
Current Outlook
With rising worries about September’s bad reputation for the stock market, and with a small consolidation in stock prices, traders seem to have suddenly turned a lot more bullish. That seasonal worry constitutes fuel for sustaining an uptrend, as all those bears seem to have turned into buyers as they flip back to a less bearish stance that further deviated the NIFTY from its moving averages, perhaps this is the highest deviation reading and over-bought condition among indicators in one year as we can see in the daily chart below.
Seasonality bad reputation sometimes may provide the further push in the stock prices as sentiment become terribly pessimistic which is contrary in nature with the stock price movement. Negative sentiment is a bottoming sort of indication for the stock prices. It matched perfectly what we have seen this week.
Normally it takes actual downward price movement to turn people to a more bearish state. We have not had much of that this time. I suspect that this rise in bearishness this year has been fuelled by more discussion than normal about weak seasonality in September. I have noticed more discussions about it everywhere, for good reason since the point is true about September being statistically a bearish month for the stock market. But it does not get the same attention every year, and this year it just seems to be more of a discussion topic, resulting in people feeling it more.
However, as I mentioned above the sudden and sharp reversal on Friday still suggests there is a fair probability of correction, and we need to be extra cautious as sharp pullback mostly comes unheralded that makes the outlook perplexed.
Conclusion
Although, sentiments are contrary in nature to stock prices but technically picture is not quite propitious to support the further rise in NIFTY without consolidating for a few weeks or months, however, few individual stocks out of the index may provide decent entry for a potential gain.
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Be Patient…; Be a Savvy Investor..!!
Pankaj